How Securities Are Traded

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "How Securities Are Traded"

Transcription

1 How Securities Are Traded Chapter 3 Primary vs. Secondary Security Sales Primary new issue issuer receives the proceeds from the sale first-time issue: IPO = issuer sells stock for the first time seasoned new issue = new issue by a company that already has floated equity target: public offering vs. private placement Secondary existing owner sells to another party issuing firm doesn t receive proceeds and is not directly involved 1-2

2 Investment Banking Arrangements Underwriting investment bankers form an underwriting syndicate they buy the shares from issuer (at the initial offering price less a spread) and resell them to the public (firm commitment) underwriters assume full risk Best Efforts investment bankers just help the issuer act as intermediaries no firm commitment, no risk 1-3 Public Offerings Public offerings registered with the SEC and sale is made to the investing public. shelf registration (rule 415, since 1982): shares can be sold for 2 years after initial registration Initial Public Offerings (IPOs) underwriters gather info from large investors on their interest, then allocate shares accordingly discounted price to reward information shared underpricing (another cost of the issue) good initial performance, but poor after 5 years 1-4

3 Private Placements direct sale to a limited number of sophisticated investors not requiring the protection of registration with SEC cheaper than public offerings dominated by institutions not suitable for very large offerings very active market for debt securities not traded on secondary markets (less liquidity) lower price 1-5 Organization of Secondary Markets Organized exchanges Over-the-Counter (OTC) market Third market Fourth market 1-6

4 Organized Exchanges auction markets with centralized order flow only members can trade (commission broker) listing requirements securities: stock, futures contracts, options, and to a lesser extent, bonds examples: NYSE, Amex, regional exchanges 1-7 OTC Market dealer market without centralized order flow no listing or membership requirements Nasdaq: largest organized stock market for OTC trading information system for individuals, brokers and dealers requirements for listing on the computer network 3 levels: inactive investors, brokerage firms, market makers securities: stocks, bonds and some derivatives most secondary bonds transactions 1-8

5 Third and Fourth Market Third Market trading of listed securities away from the exchange (NYSE-listed firms on OTC) institutional market: to facilitate trades of larger blocks of securities Fourth Market direct trading of investors of exchange-listed securities, with no middleman involved in the transaction Electronic Communication Networks (ECN) allow members to post orders and be matched with other orders, for a per-transaction fee 1-9 Trading on Exchanges Participants (commission) broker acts at the order of the client dealer ( specialist ) acts as market-maker, centralizing all orders for a specific stock Features only one specialist in a stock, but usually more stocks per specialist all trading in a stock is conducted at specialist s post price priority (best orders executed first) 1-10

6 Types of Orders Market Order buy or sell order to be executed immediately at the market price actual price may vary because of order volume or trading inside the quoted spread Limit Orders investors specify prices at which they are willing to buy (limit-buy) or sell (limit-sell) Stop-Loss stock is sold when its price falls below a limit stop-buy order = opposite transaction (used with short-sales) 1-11 Trading on the OTC Market same kinds of participants as on exchanges, but more than one dealer per stock (no specialists) brokers look for the dealer with best price trading through = dealers execute trades at their bid/ask prices rather than better prices from limit orders by public customers 1-12

7 Costs of Trading Commission fee paid to broker for making the transaction brokers can be full-service brokers (financial consultants) or discount brokers Spread: cost of trading with dealer bid: price dealer will buy from you ask: price dealer will sell to you spread: ask - bid Combination: on some trades both are paid 1-13 Buying on Margin investor borrows a part of the purchase price from the broker (brokers call loan), with the shares being used as collateral interest rate paid = interest rate charged by bank + service charge margin = the part of the purchase price contributed by the investor percentage margin = equity in account / market value of equity maximum margin is set by the Fed (currently 50%) 1-14

8 Buying on Margin (cont.) as stock prices fluctuate, the value of equity in the account changes the margin changes if the margin falls below the maintenance margin, the broker issues a margin call: the investor can add stocks or cash to the account the broker can sell some of the shares investor s return compared to just buying stock higher profit if price increases higher loss if price falls loss equal to interest if price stays the same 1-15 Short Sales investor borrows shares from their broker and sell them on the market later, they need to cover their short position, i.e. buy the shares on the market and return them to the broker (and pay the dividends paid during the loan, if any) only allowed if last change in price was positive to eliminate speculation against stocks the investor is required to keep cash or other securities in their account (collateral) worth at least the margin on short sales 1-16

9 Short Sales (cont.) as stock prices fluctuate, the value of equity in the account changes the margin changes if the margin falls below the maintenance margin, the broker issues a margin call: the investor can add stocks or cash to the account the investor can cover the short position usually accompanied by stop-buy orders investor s return high profit if price falls high loss if price rises 1-17 Regulation of Securities Markets Government Regulation federal agencies: SEC, SIPC in response to accounting scandals Self-Regulation circuit breakers = stop trading during periods of high volatility, to allow market participants to acquire better information Insider Trading the usage of inside information is illegal 1-18

How Securities Are Traded. Chapter 3

How Securities Are Traded. Chapter 3 How Securities Are Traded Chapter 3 Primary vs. Secondary Security Sales Primary new issue issuer receives the proceeds from the sale first-time issue: IPO = issuer sells stock for the first time seasoned

More information

Chapter 3. How Securities are Traded

Chapter 3. How Securities are Traded Chapter 3 How Securities are Traded Primary vs. Secondary Security Sales Primary: When firms need to raise capital, they may choose to sell (or float) new securities. These new issues typically are marketed

More information

When firms need to raise capital, they may issue securities to the public by investment bankers.

When firms need to raise capital, they may issue securities to the public by investment bankers. CHAPTER 3. HOW SECURITIES ARE TRADED When firms need to raise capital, they may issue securities to the public by investment bankers. Primary market is a market for new securities. Secondary market is

More information

Investment Analysis (FIN 383) Fall 2009. Homework 2

Investment Analysis (FIN 383) Fall 2009. Homework 2 Investment Analysis (FIN 383) Fall 2009 Homework 2 Instructions: please read carefully You should show your work how to get the answer for each calculation question to get full credit The due date is Thu,

More information

The Financial Markets and the Investment Banking Process (Chapter 3)

The Financial Markets and the Investment Banking Process (Chapter 3) Chapter 2 Summary Questions You should answer these questions as a summary for the chapter and to help you study for the exam. o What information is provided by each financial statement contained in a

More information

Answers to Concepts in Review

Answers to Concepts in Review Answers to Concepts in Review 1. (a) In the money market, short-term securities such as CDs, T-bills, and banker s acceptances are traded. Long-term securities such as stocks and bonds are traded in the

More information

BARUCH COLLEGE DEPARTMENT OF ECONOMICS & FINANCE Professor Chris Droussiotis LECTURE 2. Chapter 3 SECURITIES MARKETS

BARUCH COLLEGE DEPARTMENT OF ECONOMICS & FINANCE Professor Chris Droussiotis LECTURE 2. Chapter 3 SECURITIES MARKETS LECTURE 2 Chapter 3 SECURITIES MARKETS IPO Required Docs: Amendment to the certificate of incorporation Corporate Governance (Private are far less formal responsibility) Recruit Independent Board Members

More information

Financial Markets And Financial Instruments - Part II. How Securities are Traded? Spread. Brokerage Accounts. Commissions. Commissions: Online Brokers

Financial Markets And Financial Instruments - Part II. How Securities are Traded? Spread. Brokerage Accounts. Commissions. Commissions: Online Brokers Financial Markets And Financial Instruments - Part II How Securities are Traded? Brokerage Accounts You can choose from two types of accounts to open To open an account, you need to choose a broker Commissions

More information

CHAPTER 4 Securities Markets

CHAPTER 4 Securities Markets REVIEW QUESTIONS CHAPTER 4 Securities Markets 4-1. The third market involves OTC transactions in securities listed on the organized exchanges. The fourth market involves direct transactions among large

More information

Financial Markets and Institutions Abridged 10 th Edition

Financial Markets and Institutions Abridged 10 th Edition Financial Markets and Institutions Abridged 10 th Edition by Jeff Madura 1 12 Market Microstructure and Strategies Chapter Objectives describe the common types of stock transactions explain how stock transactions

More information

Investment Analysis (FIN 670) Fall 2009. Homework 2

Investment Analysis (FIN 670) Fall 2009. Homework 2 Investment Analysis (FIN 670) Fall 2009 Homework 2 Instructions: please read carefully You should show your work how to get the answer for each calculation question to get full credit The due date is Tue,

More information

CHAPTER 3 HOW SECURITIES ARE TRADED

CHAPTER 3 HOW SECURITIES ARE TRADED CHAPTER 3 HOW SECURITIES ARE TRADED HOW SECURITIES ARE TRADED How Firms Issue Securities Where Securities Are Traded Trading on Exchange Trading on the OTC Market How Securities Are Traded Trading Cost

More information

Review for Exam 1. Instructions: Please read carefully

Review for Exam 1. Instructions: Please read carefully Review for Exam 1 Instructions: Please read carefully The exam will have 20 multiple choice questions and 5 work problems. Questions in the multiple choice section will be either concept or calculation

More information

Financial Markets And Financial Instruments - Part I

Financial Markets And Financial Instruments - Part I Financial Markets And Financial Instruments - Part I Financial Assets Real assets are things such as land, buildings, machinery, and knowledge that are used to produce goods and services. Financial assets

More information

Understanding the Stock Market

Understanding the Stock Market Understanding the Stock Market Today s Agenda Today we ll discuss What stocks are and how they work Market cycles Information sources for stock investing What Are Stocks and How Do They Work? Stocks represent

More information

CHAPTER 3: ANSWERS OF HOW SECURITIES ARE TRADED

CHAPTER 3: ANSWERS OF HOW SECURITIES ARE TRADED CHAPTER 3: ANSWERS OF HOW SECURITIES ARE TRADED PROBLEM SETS 1. Answers to this problem will vary. 2. The dealer sets the bid and asked price. Spreads should be higher on inactively traded stocks and lower

More information

Review for Exam 1. Instructions: Please read carefully

Review for Exam 1. Instructions: Please read carefully Review for Exam 1 Instructions: Please read carefully The exam will have 21 multiple choice questions and 5 work problems. Questions in the multiple choice section will be either concept or calculation

More information

Part I: Investment Environment (continued)

Part I: Investment Environment (continued) Securities & Investments Analysis First few Weeks: Investment Environment Markets and Instruments Weeks 3 & 4: Issuing Securities Part I: Investment Environment (continued) Trading Securities (market microstructure

More information

A Closer Look at the Stock Markets

A Closer Look at the Stock Markets We b E x t e n s i o n 1 C A Closer Look at the Stock Markets This Web Extension provides additional discussion of stock markets and trading, beginning with stock indexes. Stock Indexes Stock indexes try

More information

ESSENTIAL CONCEPTS IN MANAGERIAL FINANCE

ESSENTIAL CONCEPTS IN MANAGERIAL FINANCE ESSENTIAL CONCEPTS IN MANAGERIAL FINANCE Analysis of Financial Statements (Chapter 2) Financial Statements and Reports financial reporting is used to disclose information about the firm to investors, creditors,

More information

THE STOCK MARKET GAME GLOSSARY

THE STOCK MARKET GAME GLOSSARY THE STOCK MARKET GAME GLOSSARY Accounting: A method of recording a company s financial activity and arranging the information in reports that make the information understandable. Accounts payable: The

More information

A stock is a share in the ownership of a company. Stock represents a claim on the company s assets and earnings.

A stock is a share in the ownership of a company. Stock represents a claim on the company s assets and earnings. Stock Market Basics What are stocks? A stock is a share in the ownership of a company. Stock represents a claim on the company s assets and earnings. As an owner (shareholder), you are entitled to your

More information

CHAPTER 18. Initial Public Offerings, Investment Banking, and Financial Restructuring

CHAPTER 18. Initial Public Offerings, Investment Banking, and Financial Restructuring CHAPTER 18 Initial Public Offerings, Investment Banking, and Financial Restructuring 1 Topics in Chapter Initial Public Offerings Investment Banking and Regulation The Maturity Structure of Debt Refunding

More information

CHAPTER 2: THE CANADIAN SECURITIES INDUSTRY

CHAPTER 2: THE CANADIAN SECURITIES INDUSTRY CHAPTER 2: THE CANADIAN SECURITIES INDUSTRY Topic One: Industry Overview 1. Self-regulatory Organizations (SROs). A. The SROs set rules that govern the operations of investment dealers and market activity.

More information

Outline. Securities Markets. Markets. Money and Capital Markets. Markets Orders Positions Information

Outline. Securities Markets. Markets. Money and Capital Markets. Markets Orders Positions Information Outline Securities Markets Economics 71a Spring 2007 Mayo, Chapter 3 Lecture notes 2.3 Markets Orders Positions Information Primary markets Markets New issues (IPO s, corporate and public debt) Secondary

More information

Best Execution of equity securities

Best Execution of equity securities Best Execution of equity securities When you place an order to buy or sell an equity security, we seek to obtain the most favorable terms reasonably available at the time of the execution. This is known

More information

1 Regional Bank Regional banks specialize in consumer and commercial products within one region of a country, such as a state or within a group of states. A regional bank is smaller than a bank that operates

More information

Investment Finance 421-002 Prototype Midterm I

Investment Finance 421-002 Prototype Midterm I Investment Finance 421-002 Prototype Midterm I The correct answer is highlighted by a *. Also, a concise reasoning is provided in Italics. 1. are an indirect way U. S. investor can invest in foreign companies.

More information

CHAPTER 16. Stocks and Bonds

CHAPTER 16. Stocks and Bonds CHAPTER 16 Stocks and Bonds SECTION 1: Stocks Financial Markets Stocks and bonds are bought and sold in a financial market. Financial markets channel money from some people to other people. They bring

More information

Securities Markets: Trading Financial Resources BUSN

Securities Markets: Trading Financial Resources BUSN 1 Securities Markets: Trading Financial Resources What are the different types of securities issued by a corporation? How are securities issued in the primary market and traded in the secondary market?

More information

Chapter. The Stock Market. McGraw-Hill/Irwin. Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter. The Stock Market. McGraw-Hill/Irwin. Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter The Stock Market McGraw-Hill/Irwin Copyright 2008 by The McGraw-Hill Companies, Inc. All rights reserved. The Stock Market Our goal in this chapter is to provide a big picture overview of: Who

More information

Review for Exam 1. Instructions: Please read carefully

Review for Exam 1. Instructions: Please read carefully Review for Exam 1 Instructions: Please read carefully The exam will have 25 multiple choice questions and 5 work problems covering chapter 1, 2, 3, 4, 14, 16. Questions in the multiple choice section will

More information

Web. Chapter FINANCIAL INSTITUTIONS AND MARKETS

Web. Chapter FINANCIAL INSTITUTIONS AND MARKETS FINANCIAL INSTITUTIONS AND MARKETS T Chapter Summary Chapter Web he Web Chapter provides an overview of the various financial institutions and markets that serve managers of firms and investors who invest

More information

FREQUENTLY ASKED QUESTIONS ABOUT RIGHTS OFFERINGS

FREQUENTLY ASKED QUESTIONS ABOUT RIGHTS OFFERINGS FREQUENTLY ASKED QUESTIONS ABOUT RIGHTS OFFERINGS Background What is a rights offering? A rights offering typically provides an issuer s existing shareholders the opportunity to purchase a pro rata portion

More information

Goals Information and Trading

Goals Information and Trading Information and Trading Economics 71a Gitman/Madura Chapter 16 Lecture notes 9 Information sources Information Sources Web Private Free and subscription Government Federal Reserve Information Sources Key

More information

Closed-End Funds. A closed-end fund is a type of investment company. whose shares are listed on a stock exchange

Closed-End Funds. A closed-end fund is a type of investment company. whose shares are listed on a stock exchange a guide to Closed-End Funds A closed-end fund is a type of investment company whose shares are listed on a stock exchange or are traded in the over-the-counter market. Contents What Is a Closed-End Fund?...2

More information

INVESTMENT DICTIONARY

INVESTMENT DICTIONARY INVESTMENT DICTIONARY Annual Report An annual report is a document that offers information about the company s activities and operations and contains financial details, cash flow statement, profit and

More information

Margin borrowing. Set your fi nancial future in motion.

Margin borrowing. Set your fi nancial future in motion. Margin borrowing Set your fi nancial future in motion. Maximize your brokerage account capabilities. Margin trading entails greater risk and is not suitable for all investors. Please speak with your broker

More information

Chapter 1. The Role and Environment of Managerial Finance. Learning Goals. Learning Goals (cont.)

Chapter 1. The Role and Environment of Managerial Finance. Learning Goals. Learning Goals (cont.) Chapter 1 The Role and Environment of Managerial Finance Learning Goals 1. Define finance, its major areas and opportunities available in this field, and the legal forms of business organization. 2. Describe

More information

Understanding Margin and Its Risks

Understanding Margin and Its Risks Understanding Margin and Its Risks www.siebertnet.com Before opening a margin account, you should have a clear understanding of the basic facts about margin and the risks of trading securities on margin.

More information

Stocks: An Introduction

Stocks: An Introduction Stocks: An Introduction Page 1 of 7, see disclaimer on final page Stocks: An Introduction What are stocks? Stock equals ownership A stock represents a share of ownership in a business. When you hold one

More information

Becoming a Publicly Trading Company Via Reverse Mergers and Self-Registrations

Becoming a Publicly Trading Company Via Reverse Mergers and Self-Registrations 1345 AVENUE OF THE AMERCIAS, 11 th FLOOR NEW YORK, NEW YORK 10105 TELEPHONE: (212) 370-1300 FACSIMILE: (212) 370-7889 www.egsllp.com Becoming a Publicly Trading Company Via Reverse Mergers and Self-Registrations

More information

FIN 432 Investment Analysis and Management Review Notes for Midterm Exam

FIN 432 Investment Analysis and Management Review Notes for Midterm Exam FIN 432 Investment Analysis and Management Review Notes for Midterm Exam Chapter 1 1. Investment vs. investments 2. Real assets vs. financial assets 3. Investment process Investment policy, asset allocation,

More information

Chapter 14. Investing in Stocks. McGraw-Hill/Irwin. Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 14. Investing in Stocks. McGraw-Hill/Irwin. Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 14 Investing in Stocks McGraw-Hill/Irwin Copyright 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Investing in Securities Securities include a broad range of investments. Stocks.

More information

is a temporary restriction on program trading in a particular security or market, usually to reduce dramatic price movements. Select correct option:

is a temporary restriction on program trading in a particular security or market, usually to reduce dramatic price movements. Select correct option: Fin630(investment analysis and portfolio management) Solved Quizz Which of the following is applied on the shares only? Brick breaker Circuit breaker Bubble breaker Suburb breaker is a temporary restriction

More information

Producer Price Indexes for Stockbrokers, Dealers and Investment Banking Companies

Producer Price Indexes for Stockbrokers, Dealers and Investment Banking Companies Producer Price Indexes for Stockbrokers, Dealers and Investment Banking Companies Shelley Winston Producer Price Index Program U.S. Bureau of Labor Statistics Producer Price Index for Stockbrokers, Dealers

More information

Chapter 2 Financial Market Environment. 2012 Pearson Prentice Hall. All rights reserved. 1-1

Chapter 2 Financial Market Environment. 2012 Pearson Prentice Hall. All rights reserved. 1-1 Chapter 2 Financial Market Environment 2012 Pearson Prentice Hall. All rights reserved. 1-1 Financial Institutions & Markets Firms that require funds from external sources can obtain them in three ways:

More information

Virtual Stock Market Game Glossary

Virtual Stock Market Game Glossary Virtual Stock Market Game Glossary American Stock Exchange-AMEX An open auction market similar to the NYSE where buyers and sellers compete in a centralized marketplace. The AMEX typically lists small

More information

CHAPTER 14. Investing in Securities. Beginning to Invest in Stocks. When Should You Sell a Stock? Personal Finance

CHAPTER 14. Investing in Securities. Beginning to Invest in Stocks. When Should You Sell a Stock? Personal Finance CHAPTER 14 Investing in Stocks Personal Finance 7e Kapoor Dlabay Hughes 14-1 Why Corporations Issue Common Stock To raise money to start or expand a business. To help pay for ongoing business expenses.

More information

PFIN 12: Buying and Selling Investments 78

PFIN 12: Buying and Selling Investments 78 PFIN 12: Buying and Selling Investments 78 12-1 Researching Investments OBJECTIVES Describe the types of financial information found in magazines, newspapers, and newsletters. Describe the type of data

More information

Chapter 14: Savings and Investing Savings and Investing

Chapter 14: Savings and Investing Savings and Investing Savings and Investing Consumers can use any money left over from purchasing goods and services toward savings or investing. Saving means putting money aside for future use. Investing is using savings to

More information

Stock Market Q & A. What are stocks? What is the stock market?

Stock Market Q & A. What are stocks? What is the stock market? Stock Market Q & A What are stocks? A stock is a share in the ownership of a corporation. The person buying the stock becomes a stockholder, or shareholder, of the corporation and earns dividends on his

More information

Equities 2: The Stock Market

Equities 2: The Stock Market Equities 2: The Stock Market Jan 2016 Week 3, FNCE102 R. Loh Raising Stock Stock 1 Equities 2 overview Raising Stock Initial public offering Understanding IPO tombstone ads IPO underpricing offering Pricing

More information

Instructional Materials Evaluation Criteria Banking and Finance Title ISBN#

Instructional Materials Evaluation Criteria Banking and Finance Title ISBN# Instructional Materials Evaluation Criteria Banking and Finance Title ISBN# Established Track Record? YES NO If yes, please list research source(s): Meets National Standards? YES NO Standard I: The student

More information

Sample of Pre-Study Materials for THE DALTON REVIEW

Sample of Pre-Study Materials for THE DALTON REVIEW Sample of Pre-Study Materials for THE DALTON REVIEW Review for the CFP Certification Examination THE DALTON REVIEW BROUGHT TO YOU BY DALTON EDUCATION Sample of Pre-Study Materials Dalton Education, L.L.C.

More information

Trading Costs. Characteristics of well-functioning markets

Trading Costs. Characteristics of well-functioning markets Trading Costs Commission: fee paid to broker for making the transaction Spread: cost of trading with dealer Bid: price dealer will buy from you Ask: price dealer will sell to you Spread: ask - bid Combination:

More information

ACTIVITY 20.1 THE LANGUAGE OF FINANCIAL MARKETS: DEFINITIONS

ACTIVITY 20.1 THE LANGUAGE OF FINANCIAL MARKETS: DEFINITIONS ACTIVITY 20.1 THE LANGUAGE OF FINANCIAL MARKETS: DEFINITIONS AMEX: The acronym stands for American Stock Exchange, formerly an independent market but now part of the New York Stock Exchange; the AMEX s

More information

How Securities Are Traded

How Securities Are Traded How Securities Are Traded What is this project about? You will learn how securities are traded on exchanges, particularly how to conduct margin trades, short sales, and submit limit orders. What case do

More information

Going Public: Go Public Services, Reverse Merger and The Public Shell Information

Going Public: Go Public Services, Reverse Merger and The Public Shell Information Going Public: Go Public Services, Reverse Merger and The Public Shell Information Welcome to the Go Public Supersite & Going Public Portal offering information about reverse mergers, public shell corporations,

More information

Before You Invest Post Test (HS)

Before You Invest Post Test (HS) Before You Invest Post Test (HS) 1. Common stock ownership gives investors a. voting rights in shareholders meetings b. guaranteed dividends c. low risk with a high rate of return. 2. The statement risk

More information

Chapter 001 Introduction to Corporate Finance

Chapter 001 Introduction to Corporate Finance Multiple Choice Questions 1. The person generally directly responsible for overseeing the tax management, cost accounting, financial accounting, and data processing functions is the: a. treasurer. b. director.

More information

Referred to as the statement of financial position provides a snap shot of a company s assets, liabilities and equity at a particular point in time.

Referred to as the statement of financial position provides a snap shot of a company s assets, liabilities and equity at a particular point in time. Glossary Aggressive investor Balance sheet Bear market Typically has a higher risk appetite. They are prepared or can afford to risk much more and for this they stand to reap the big rewards. Referred

More information

Lecture Two Essentials of Trading. Andy Bower www.alchemetrics.org

Lecture Two Essentials of Trading. Andy Bower www.alchemetrics.org Lecture Two Essentials of Trading Andy Bower www.alchemetrics.org Essentials of Trading Why People Trade Money What People Trade Market Where People Trade Exchanges How People Trade Brokers Orders Margin

More information

sample materials This material is from the Council for Economic Education

sample materials This material is from the Council for Economic Education sample materials This material is from the Council for Economic Education To find out more about this publication, visit http://store.councilforeconed.org Permissions and usage You have permission to use

More information

Excess Equity and Buying Power. Non-Restricted Accounts. Minimum Maintenance Requirement. NYSE/NASD Minimum Credit Requirement

Excess Equity and Buying Power. Non-Restricted Accounts. Minimum Maintenance Requirement. NYSE/NASD Minimum Credit Requirement Margins Excess Equity and Buying Power Restricted Accounts Same-Day Substitution Non-Restricted Accounts Minimum Maintenance Requirement NYSE/NASD Minimum Credit Requirement The Short Sale Credit Balance

More information

GENERAL INFORMATION ON SECURITIES 1

GENERAL INFORMATION ON SECURITIES 1 GENERAL INFORMATION ON SECURITIES 1 1. Investing into securities Contemporary securities markets provide a person wishing to invest his/her money into securities, i.e. an investor, with the opportunity

More information

HOW TO SELL A STOCK BY KELLY GREEN

HOW TO SELL A STOCK BY KELLY GREEN HOW TO SELL A STOCK BY KELLY GREEN HOW TO SELL A STOCK In our first report, How to Buy a Stock, we took you step-by-step through selecting a broker and making your first trade. But we also pointed out

More information

The Young Investor s Guide To Understanding The Terms Used In Investing.

The Young Investor s Guide To Understanding The Terms Used In Investing. The Young Investor s Guide To Understanding The Terms Used In Investing. The Young Investor Dictionary compliments of Integrity Mutual Funds. YOUNG INVESTOR DICTIONARY Asset Something of value. The property

More information

CHAPTER 9 INTERNATIONAL FINANCIAL MARKETS

CHAPTER 9 INTERNATIONAL FINANCIAL MARKETS CHAPTER 9 INTERNATIONAL FINANCIAL MARKETS LEARNING OBJECTIVES: 1. Discuss the purposes, development, and financial centers of the international capital market. 2. Describe the international bond, international

More information

A guide to investing in closed-end funds What you should know before you buy

A guide to investing in closed-end funds What you should know before you buy A guide to investing in closed-end funds What you should know before you buy Before you make an investment decision, it is important to review your financial situation, investment objectives, risk tolerance,

More information

Problem Set 1 Foundations of Financial Markets Instructor: Erin Smith Summer 2011 Due date: Beginning of class, May 31

Problem Set 1 Foundations of Financial Markets Instructor: Erin Smith Summer 2011 Due date: Beginning of class, May 31 Problem Set Foundations of Financial Markets Instructor: Erin Smith Summer 20 Due date: Beginning of class, May 3. Suppose the debt holders of a cosmetics firm hold debt with a face value of $500,000.

More information

Stocks: An Introduction

Stocks: An Introduction Marblehead Financial Services Bill Bartin, CFP Located at Marblehead Bank 21 Atlantic Avenue Marblehead, MA 01945 781-476-0600 781-715-4629 wbartin@infinexgroup.com Stocks: An Introduction Page 1 of 7,

More information

ROYAL MALAYSIAN CUSTOMS GOODS AND SERVICES TAX GUIDE

ROYAL MALAYSIAN CUSTOMS GOODS AND SERVICES TAX GUIDE ROYAL MALAYSIAN CUSTOMS GOODS AND SERVICES TAX GUIDE ON INVESTMENT BANKING CONTENTS INTRODUCTION... 1 General Operation of Goods and Services Tax (GST)... 1 OVERVIEW GENERAL OPERATIONS OF THE INDUSTRY...

More information

Chapter 2. Practice Problems. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 2. Practice Problems. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 2 Practice Problems MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Assume that you borrow $2000 at 10% annual interest to finance a new

More information

The right bond at the right price: Understanding bond pricing. Smart bond buying could save you thousands.

The right bond at the right price: Understanding bond pricing. Smart bond buying could save you thousands. The right bond at the right price: Understanding bond pricing. Smart bond buying could save you thousands. Executive summary Compared with stock market investing, it s not always easy to know what is

More information

Chapter 5 Valuing Stocks

Chapter 5 Valuing Stocks Chapter 5 Valuing Stocks MULTIPLE CHOICE 1. The first public sale of company stock to outside investors is called a/an a. seasoned equity offering. b. shareholders meeting. c. initial public offering.

More information

Non-traded financial contracts

Non-traded financial contracts 11-1 Introduction Financial contracts are made between lenders and borrowers Non-traded financial contracts are tailor-made to fit the characteristics of the borrower In business financing, the differences

More information

BEAR: A person who believes that the price of a particular security or the market as a whole will go lower.

BEAR: A person who believes that the price of a particular security or the market as a whole will go lower. Trading Terms ARBITRAGE: The simultaneous purchase and sale of identical or equivalent financial instruments in order to benefit from a discrepancy in their price relationship. More generally, it refers

More information

Chapter Objectives. Chapter 9. Financial Markets and Institutions. What are the two major classes of investment alternatives? Why invest?

Chapter Objectives. Chapter 9. Financial Markets and Institutions. What are the two major classes of investment alternatives? Why invest? Chapter Objectives Chapter 9. Financial Markets and Institutions To identify the basic investment alternatives To understand the nature of securities market, distinguishing between organized exchanges

More information

Asymmetric Information in Financial Markets: Adverse Selection Moral Hazard. Market For Lemons. Importance of Financial Development for

Asymmetric Information in Financial Markets: Adverse Selection Moral Hazard. Market For Lemons. Importance of Financial Development for ECON 354 Money and Banking Professor Yamin Ahmad Lecture 7 Facts of Financial Structure Adverse Selection and Moral Hazard in Financial Markets Big Concepts Asymmetric Information in Financial Markets:

More information

CHAPTER 1: THE CAPITAL MARKET

CHAPTER 1: THE CAPITAL MARKET CHAPTER 1: THE CAPITAL MARKET Topic One: Investment Capital 1. Characteristics of Capital. A. Capital is invested in political and economic climates in which profit can be created. It is highly sensitive

More information

Money Market. The money market is the market for low-risk, short-term debt.

Money Market. The money market is the market for low-risk, short-term debt. Money Market The money market is the market for low-risk, short-term debt. 1 Substitution Different money-market assets are close substitutes. Since an investor in the money market can choose which asset

More information

ELECTRONIC TRADING GLOSSARY

ELECTRONIC TRADING GLOSSARY ELECTRONIC TRADING GLOSSARY Algorithms: A series of specific steps used to complete a task. Many firms use them to execute trades with computers. Algorithmic Trading: The practice of using computer software

More information

CHAPTER 2. Overview of the Financial System. Copyright 2012 Pearson Prentice Hall. All rights reserved.

CHAPTER 2. Overview of the Financial System. Copyright 2012 Pearson Prentice Hall. All rights reserved. CHAPTER 2 Overview of the Financial System Copyright 2012 Pearson Prentice Hall. All rights reserved. Chapter Preview Suppose you want to start a business manufacturing a household cleaning robot, but

More information

Introduction to Money & Banking Lecture notes 2010 Matti Estola

Introduction to Money & Banking Lecture notes 2010 Matti Estola Introduction to Money & Banking Lecture notes 2010 Matti Estola Literature Henderson & Poole: Principles of Economics, Mishkin: The Economics of Money, Banking, and Financial Markets, Extra material given

More information

Trading Securities CHAPTER 4 INTRODUCTION TYPES OF ORDERS

Trading Securities CHAPTER 4 INTRODUCTION TYPES OF ORDERS CHAPTER 4 Trading Securities INTRODUCTION Investors who do not purchase their stocks and bonds directly from the issuer must purchase them from another investor. Investor-toinvestor transactions are known

More information

Types of Stock. Common Stock most common form of stock. Preferred Stock. Companies may customize other classes of stock.

Types of Stock. Common Stock most common form of stock. Preferred Stock. Companies may customize other classes of stock. Stock Market Basics What are Stocks? Stock is ownership in a publicly traded company. Stock is a claim on the company s assets and earnings. The more stock you have, the greater your claim as an owner.

More information

Investing in Stocks 14-1. Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

Investing in Stocks 14-1. Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Investing in Stocks McGraw-Hill/Irwin Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved. 14-1 Invest in stocks Learning Objectives Identify the most important features of common and

More information

Mutual Funds and Other Investment Companies. Chapter 4

Mutual Funds and Other Investment Companies. Chapter 4 Mutual Funds and Other Investment Companies Chapter 4 Investment Companies financial intermediaries that collect funds from individual investors and invest in a portfolio of assets shares = claims to portfolio

More information

Uniform Combined State Law Examination (Series 66) Exam Specifications and Outline (Effective 1/1/2010)

Uniform Combined State Law Examination (Series 66) Exam Specifications and Outline (Effective 1/1/2010) Uniform Combined State Law Examination (Series 66) Exam Specifications and Outline (Effective 1/1/2010) CONTENT AREA # of Items 1. Economic Factors and Business Information 5 (5%) A. Financial Reporting

More information

1 Proactive risk management is sometimes described as fire fighting.

1 Proactive risk management is sometimes described as fire fighting. 1 Proactive risk management is sometimes described as fire fighting. 2 Software risk always involves two characteristics A) fire fighting and crisis management B) known and unknown risks C) uncertainty

More information

Brief Overview of Futures and Options in Risk Management

Brief Overview of Futures and Options in Risk Management Brief Overview of Futures and Options in Risk Management Basic Definitions: Derivative Security: A security whose value depends on the worth of other basic underlying variables. E.G. Futures, Options,

More information

Complex Products. Non-Complex Products. General risks of trading

Complex Products. Non-Complex Products. General risks of trading We offer a wide range of investments, each with their own risks and rewards. The following information provides you with a general description of the nature and risks of the investments that you can trade

More information

The Stock Market Dr Andrew Street 1

The Stock Market Dr Andrew Street 1 The Stock Market Dr Andrew Street 1 Introduction Stocks (also known as shares or equities) represent an interest in the ownership of companies or corporations. These securities may exist as paper certificates

More information

RISK DISCLOSURE NOTICE

RISK DISCLOSURE NOTICE RISK DISCLOSURE NOTICE www.walbrookcapitalmarkets.com Equities Futures Options FX CFDs Fixed Income SECTION 1 / INTRODUCTION This Risk Disclosure Notice has been produced by Walbrook Capital Markets Limited

More information

PENNY STOCK UNSOLICITED TRANSACTION ACKNOWLEDGMENT

PENNY STOCK UNSOLICITED TRANSACTION ACKNOWLEDGMENT PENNY STOCK UNSOLICITED TRANSACTION ACKNOWLEDGMENT DATE CLIENT NAME: ADDRESS: Dear : You recently requested that we execute for your account a purchase or sale of (shares) that trades at less than $5.00

More information

Practice Set #1 and Solutions.

Practice Set #1 and Solutions. FIN-672 Securities Analysis & Portfolio Management Professor Michel A. Robe Practice Set #1 and Solutions. What to do with this practice set? To help MBA students prepare for the assignment and the exams,

More information

NASAA Investment Adviser Competency Exam (Series 65) Exam Specifications and Outline (Effective 1/1/2010)

NASAA Investment Adviser Competency Exam (Series 65) Exam Specifications and Outline (Effective 1/1/2010) NASAA Investment Adviser Competency Exam (Series 65) Exam Specifications and Outline (Effective 1/1/2010) CONTENT AREA # of Items 1. Economic Factors and Business Information 19 (14%) A. Basic economic

More information

Currency Futures and Forward Contracts

Currency Futures and Forward Contracts Currency Futures and Forward Contracts by Geneviève Payette presented to Gregor Smith Queen s University January 28, 2005 In the past 30 years exchange rates have become much more volatile and less predictable

More information